World's Richest Countries Research Articles

Policy Watch: Debt Relief

At the Gleneagles summit in July 2005, the heads of state from the G-8 countries—the United States, Canada, France, Germany, Italy, Japan, Russia and the United Kingdom—called on the International Monetary Fund (IMF), the World Bank and the African Development Bank to cancel 100 percent of their debt claims on the world's poorest countries. The world's richest countries have agreed in principle to forgive roughly $55 billion dollars owed by the world's poorest nations. This article considers the wisdom of the proposal for debt forgiveness, from the standpoint of stimulating economic growth in highly indebted countries. In the 1980s, debt relief under the “Brady Plan” helped to restore investment and growth in a number of middle-income developing countries. However, the debt relief plan for the Heavily Indebted Poor Countries (HIPC) launched by the World Bank and the International Monetary Fund in 1996 has had little impact on either investment or growth in the recipient countries. We will explore the key differences between the countries targeted by these two debt relief schemes and argue that the Gleneagles proposal for debt relief is, at best, likely to have little effect at all. Debt relief is unlikely to help the world's poorest countries because, unlike the middle-income Brady countries, their main economic difficulty is not debt overhang, but an absence of functional economic institutions that provide the foundation for profitable investment and growth. We will show that debt relief may be more valuable for Brady-like middle-income countries than for low-income ones because of how it leverages the private sector.

A not-so-modest proposal

The end of poverty: economic possibilities for our time Jeffrey D. Sachs, New York: The Penguin Press; 2005 396 pp $40 ISBN 1-59420-045-9 Must the poor always be with us? If leaders of the world's richest countries would only heed his diagnosis and prescription, prominent US economist Jeffrey Sachs

The kindness of strangers

On the fourth anniversary of 9/11, Americans find themselves once again counting the cost of an unimaginable catastrophe. This time though, the world has looked on not in awe at the human spirit arising from the ashes of the Twin Towers, but in shock and shame at the sight of the world's richest country doing so little so late for its poorest people. The fallout from Hurricane Katrina will be weighed in thousands of lives lost and many more thousands wrecked (pp 526, 531, 582), and in further damage to America's reputation around the world. When the US …

The Role of Agriculture in Development

A longstanding question in economics is why some countries are so much richer than others. Today, for example, income per capita in the world's richest countries is roughly thirty-five times greater than it is in the world's poorest countries. Recent work argues that the proximate cause of the disparity is that today's poor countries began the process of industrialization much later and that this process is slow. In this paper we argue that a model of structural transformation provides a useful theory of both why industrialization occurs at different dates, and why it proceeds slowly. A key implication of this model is that growth in agricultural productivity is central to development, a message that also appears prominently in the traditional development literature.

The Kyoto Protocol: A Flawed Concept

The framework of the Kyoto Protocol, an agreement for the world's rich countries to reduce their greenhouse gas emissions, is deeply flawed. This paper explains why. The Protocol lacks essential country coverage, provides an inadequate basis for allocating emission rights, lacks provision for monitoring and enforcement, and implies politically unacceptable transfers among governments under a (necessary and desirable) arrangement for trading emission rights. In addition, it would by itself do little to limit climate change. An alternative approach to limiting greenhouse gas emissions is suggested, focussing on international agreement on common actions to reduce emissions. And contingency plans for adaptation to climate change and for sequestration greenhouse gases are urged.

The Growth of Nations

AVERAGE INCOMES in the world's richest countries are more than ten times as high as in the world's poorest countries. It is apparent to anyone who travels the world that these large differences in income lead to large differences in the quality of life. Less apparent are the reasons for these differences. What is it about the United States, Japan, and Germany that makes these countries so much richer than India, Indonesia, and Nigeria? How can the rich countries be sure to maintain their high standard of living? What can the poor countries do to join the club? After many years of neglect, these questions are again at the center of macroeconomic research and teaching. Long-run growth is now widely viewed to be at least as important as short-run fluctuations. Moreover, growth is not just important. It is also a topic about which macroeconomists, with their crude aggregate models, have something useful to say. My goal here is to assess what we now know about economic growth. The scope of this paper is selective and, to some extent, idiosyncratic. The study of growth has itself grown so rapidly in recent years that it would take an entire book to discuss the field thoroughly.' In this paper, I do not try to lay out the many different views in the large literature on economic growth. Instead, I try to present my own views, as cogently as I can, on what we know about the growth of nations.

The Jobs Challenge of the World's Rich Countries

The Jobs Challenge of the World's Rich Countries

CARICOM Countries and the Caribbean Basin Initiative

On February 24, 1982, President Reagan promulgated his Caribbean Basin Plan-popularly known as the Caribbean Basin Initiative (CBI)which subsequently became law under the Caribbean Basin Economic Recovery Act (CBERA), effective January 1, 1984. A primary economic objective of the CBI is to help beneficiary Caribbean Basin countries earn their own way toward self-sustaining growth (Reagan, 1982: 323) by providing aid to encourage private-sector activities, by allowing one-way duty-free exports to the United States, and by stimulating private investment, national and foreign. Although the CBI has been operating for almost six years, many believe that it has fallen very short of expectations. A Congressional Study Mission and Symposium on the Caribbean Basin Initiative (U.S. House of Representatives, Committee on Foreign Affairs, 1987: 5), held in Barbados, September 18-19, 1987, found that was virtual unanimity at the symposium, as there is in the Caribbean in general, that the CBI has not fulfilled its promise of stimulating economic growth and development. Jamaican Weekly Gleaner (April 11, 1988) quoted the head of the House Ways and Means subcommittee on trade, Congressman Sam Gibbons, as saying: The original CBI is not the success we hoped for.... consensus of opinion among regional leaders in 1986 that the CBI had not proven beneficial to countries of the Caribbean Community (CARICOM) as a whole (Government of Barbados, 1986: 22) still holds today (Daily Nation, April 26, 1988). Indeed the government of Montserrat declared that as of August 13, 1987, it had attracted no industries under the Caribbean Basin Economic Recovery Act of 1983.' That a one-way duty-free trading arrangement with the world's richest country would only confer marginal benefits on very small beneficiary CBI countries (Jamaican Weekly Gleaner, November 30, 1987) seems at variance with conventional economic theory. Conventional economic theory (Kenen,

The IMS (International Monetary System ... or Scandal?) and the EMS (European Monetary System ... or Success?)

The author reviews the disastrous history of the international monetary system. Since the end of World War II total world reserves have exploded and their distribution over time between countries has tended towards imbalance rather than away from it. An important reason is found in the role of dominant system currencies. The overvaluation of such currencies allows the issuing governments to behave irresponsibly; for instance the world's richest country, the United States, is currently also the world's biggest debtor. Such is the intellectual consensus but changing such a system is difficult, not least because current political systems have allowed it to occur. However, the end of the cold war and EMS offer new ways forward. JEL: E42, F33